Sahn Ward Coschignano & Baker, PLLC Wins Decision in International Contract Dispute

Litigation

The Firm successfully opposed a plaintiff’s attempt to amend a complaint in a complex international contract dispute concerning the purchase and shipment of confectionary equipment involving European business entities.  Partners, Jon A. Ward, Esq. and Andrew M. Roth, Esq., and associate Joseph R. Bjarnson, Esq., represented the business entity being sued in the United States District Court for the Eastern District of New York by the plaintiff, a purchaser based in Switzerland, for, inter alia, breach of contract and breach of the implied covenant of good faith and fair dealing.

In GFE Global Finance & Engineering Ltd. v. ECI Limited (USA), Inc., et al., No. 12-CV-1801 (E.D.N.Y.), the plaintiff sought to amend its complaint, for the second time, to assert claims of breach of contract and breach of the implied covenant of good faith and fair dealing against ECI Limited (USA), Inc. (“ECI”) based on the allegation that ECI did not assist plaintiff in obtaining a copy of a bill of lading meant for plaintiff that ECI instead delivered to plaintiff’s agents, who were allegedly not acting with plaintiff’s authority or on its behalf.  In its previous complaints, plaintiff had asserted causes of action for breach of contract, specific performance and conversion based on similar facts.

The District Court denied plaintiff’s motion pursuant to Federal Rule of Civil Procedure 15(a)(2) for leave to amend its complaint on the grounds that plaintiff’s claims for breach of contract and breach of the implied covenant of good faith and fair dealing were futile.  Specifically, the District Court held that after ECI had delivered the bill of lading to plaintiff’s agent, as was contemplated under the contract and in prior dealings between the entities, ECI was not under further duty to supply plaintiff with a duplicate bill of lading after plaintiff’s agents failed to deliver the document to it.  The District Court noted that plaintiff could not point to any provision of the contract, or case authority, requiring ECI to take further actions, nor could plaintiff point to any allegation that ECI acted in bad faith by delivering the bill of lading to plaintiff’s agents, especially since plaintiff acknowledged that ECI had rightfully relied upon the agents’ apparent authority to act on plaintiff’s behalf at the time ECI delivered the bill of lading.  To read the Memorandum & Order, click here.

For more information on this case, or to discuss commercial litigation matters generally, please contact us.

Posted by Joseph R. Bjarnson

Electronic Filing of Litigation Documents to Become Mandatory in Suffolk County for All Commercial Division and Medical Malpractice Cases

Litigation

On March 15, 2013, the electronic filing of litigation documents through the New York State Courts Electronic Filing System (“NYSCEF”) will become mandatory in Suffolk County for all Commercial Division and Medical Malpractice cases. For Commercial Division cases, the program applies only to those cases meeting the requisites of Uniform Rules of the Trial Courts § 202.70. As of March 15, those cases must be commenced electronically and initiating documents will not be accepted in hard copy form. Service of documents shall be in the traditional hard copy, however, the plaintiff/petitioner must serve the defendant/respondent a Notice of Commencement of Mandatory E-Filed Case. Thereafter, with limited exceptions, all documents must be e-filed.

Court fees are to be paid shall be paid by Master Card, Visa or American Express through NYSCEF. There will be no additional fees to utilize NYSCEF, to file documents in the system, serve documents through it, or print out hard copies from it.

Posted by Elaine Colavito

Sahn Ward Coschignano & Baker, PLLC Wins Dismissal for Employers of Fair Labor Standards Act and New York Labor Law Claims in Employment and Labor Lawsuit

Litigation

The Firm recently won dismissal in a complex employment and labor case for three (3) separate companies operating under a trade name in the commercial kitchen cleaning and repair business. Partner, Jon A. Ward, Esq., and associates Ralph Branciforte, Esq. and Adam H. Koblenz, Esq. represented the businesses being sued in Manhattan Federal Court by former industrial cleaning employees for, inter alia, violations of the Fair Labor Standards Act, New York Labor Law and unjust enrichment for alleged nonpayment of overtime wages. To read the Decision/Order, click here.

Posted by Adam H. Koblenz

TASK FORCE RECOMMENDS WAYS TO EXECUTE REFORMS TO COMMERCIAL DIVISION

Litigation

On January 23, 2013, the Commercial and Federal Litigation Section of the New York State Bar Association met in Manhattan for a pair of panels exploring the future of commercial litigation in the State, with a significant focus on recently proposed reforms to the Commercial Division. (NYLJ, Pierson, Panel Suggest Ways to Execute Reforms to Commercial Division, January 24, 2013). The Commercial Division of the New York State Supreme Court handles complex, commercial/business cases throughout the State.

The genesis of this critical review dates back nearly a year ago when Chief Judge Jonathan Lippmann first convened a panel entitled “The Chief Judge’s Taskforce Report on Commercial Litigation in the 21st Century: From Ideas to Implementation,” which focused on the execution of key reforms to the Commercial Division.

The latest panel was moderated by former Chief Judge Judith Kaye, who also co-chaired the Chief Judge’s task force. Other distinguished panelists included presiding judges from the Court of Appeals and Supreme Court, and other notable practitioners in the private sector.

Panelists noted the modicum of success achieved by the implementation of the Commercial Division, but emphasized that further changes are still needed to ensure a high quality is maintained and to “attract major players with important cases.” As one panelist aptly noted, “[t]o be a great court, you gotta get great cases.”

To this end, Judge Kaye put forth an initiative that could be achieved by “court rule without new money, leaving aside the taskforce’s recommendation for more judges and more judicial support.” Recent proposed measures include raising the threshold to enter the Commercial Division from $150,000 to $500,000 or more, ensuring that cases are assigned to the Commercial Division as early as possible without motion practice, and a proposed rule that a party must ask to have a case assigned to the Commercial Division within 90 days (or be precluded from having such case assigned to the Commercial Division).

We will continue to provide further updates on this task force and other proposed reform measures to the Commercial Division.

Posted by Adam H. Koblenz

GOVERNOR ANDREW M. CUOMO ISSUES EXECUTIVE ORDER CALLING FOR THE TEMPORARY SUSPENSION AND MODIFICATION OF STATUTORY PROVISIONS ESTABLISHING TIME LIMITATIONS ON ACTIONS AND TIME IN WHICH TO TAKE AN APPEAL

Litigation

On October 26, 2012, New York State Governor Andrew M. Cuomo issued Executive Order Number 47 declaring a disaster emergency in all 62 counties in the State of New York due to the impact of Hurricane Sandy.

Subsequently, on October 31, 2012, Governor Cuomo issued Executive Order Number 52 that, among other things, temporarily suspends and modifies certain statutory provisions under the New York Civil Practice Law and Rules (“CPLR”), as well as the Court of Claims Act, the Criminal Procedure Law (“CPL”), and the Family Court Act.  In relation to the time limitations for bringing a lawsuit, or taking an appeal, Executive Order Number 52 temporarily suspends (1) the deadline to bring a lawsuit if the statute of limitations for a claim was to expire during the immediate period following the Governor’s declaration of a disaster emergency (CPLR § 201); and (2) the deadline to take an appeal, cross-appeal or move for permission to appeal if such a deadline was to expire during the immediate period following the Governor’s declaration of a disaster emergency (CPLR § 5513; Court of Claims Act § 25).  Further, Executive Order Number 52 will remain in effect “until further notice.”

This Executive Order only pertains to those statutory provisions that a Court typically does not have jurisdiction to change or otherwise modify, which generally includes the time to commence an action and the time to appeal a decision or order of the Court.  As such, agreements amongst counsel, including, but not limited to, stipulations governing, for example, the time to answer or otherwise respond to a complaint, a discovery request, and motion practice are not covered by Executive Order Number 52.

Please consult us if you have any questions or concerns as to whether a claim you have, or that may arise in the near future, is affected by this Executive Order.  We will continue to provide further updates if any changes occur in this area of the law.

Executive Order Number 52 can be accessed here:  Suspension Of Time Limitations.

Posted by Jon A. Ward

Sahn Ward Coschignano & Baker, PLLC Joins As Pro-Bono Co-Counsel For Plaintiffs in David, et al. v. Signal International, LLC et al., No. 08-cv-1220 (E.D. La.)

Litigation

Sahn Ward Coschignano & Baker, PLLC has joined as pro-bono co-counsel for the Plaintiffs in David, et al. v. Signal International, LLC et al., No. 08-cv-1220 (E.D. La.).  The Firm will be represented by Joseph R. Bjarnson, Esq. who will join attorneys from the law firm of Crowell & Moring LLP, the Southern Poverty Law Center, the American Civil Liberties Union, the Asian American Legal Defense and Education Fund, and the Louisiana Justice Institute in representing the Plaintiffs.

The allegations in the lawsuit charge that Signal International, LLC (“Signal”), a marine industry company with shipyards in Mississippi and Texas, and a network of recruiters and labor brokers engineered a scheme to traffic and defraud nearly five hundred workers and coerce them to work in Signal’s facilities.

The complaint alleges that Signal used the federal H-2B guestworker program to import the Plaintiffs, and hundreds of other Indian men, to work as welders, pipefitters and shipfitters.  The workers paid recruiters as much as $20,000 or more for travel, visa, recruitment and other fees after they were told it would lead to good jobs, green cards and permanent U.S. residency.  But, when the workers began arriving at Signal’s facilities in early 2007, they discovered they wouldn’t receive the green cards as promised.  Instead, they received 10-month H-2B visas, and were forced to live in crowed, on-site labor camps designated solely for Signal’s Indian workforce.

For Sahn Ward Coschignano & Baker, PLLC, its participation in the lawsuit reflects its ongoing commitment to serving the community and individuals in need through pro bono services and community involvement efforts.

For more information on this case, or other litigation matters, please contact us.

Posted by Joseph R. Bjarnson

Elaine Colavito writes the “Bench Briefs” column for The Suffolk Lawyer, an official publication of the Suffolk County Bar Association.

Litigation

Every month, Elaine Colavito writes the “Bench Briefs” column for The Suffolk Lawyer, an official publication of the Suffolk County Bar Association (www.scba.org). She reviews decisions of interest and briefs those that she finds pertinent to Suffolk County attorneys in a variety of practice areas. Readers of her column appreciate being kept up-to-date with new significant decisions that are relevant to their respective practices. To read the latest edition of The Suffolk Lawyer, click here.

Posted by Elaine Colavito

Sahn Ward Coschignano & Baker, PLLC Wins Summary Judgment for Real Estate Appraiser in Fraud Case Concerning the Purchase of an Apartment

Litigation

A New York court recently held that, in a real estate transaction, a buyer is required to conduct his own due diligence by the exercise of ordinary intelligence to discover the true nature of the transaction. See Decision/Order, Estrada v. Metropolitan Property Group, Inc., et al., No. 110123/11, at 4-5 (Sup. Ct. N.Y. Co. Jul. 30, 2012).

In Estrada v. Metropolitan Property Group, Inc., Andrew M. Roth, Esq., a partner at Sahn Ward Coschignano & Baker, PLLC, represented Victoria Hughes (“Hughes”), a real estate appraiser being sued for, inter alia, fraudulent misrepresentation. The case arose from the purchase of a residential cooperative apartment unit under a purchase contract executed in October 2005. Decision/Order at 1. The Plaintiff, Brian Estrada (“Estrada”), responded to an advertisement for the sale of the apartment placed by Metropolitan Property Group, Inc. that identified the square footage of the apartment as approximately 550 square feet. Id. At the open house, Estrada received a flyer for the apartment that listed it as 500 square feet. Following the execution of a purchase contract, Estrada applied to Wells Fargo Bank, N.A. (“Wells Fargo”) for a loan to purchase the apartment. Id. Wells Fargo then retained Hughes to perform an appraisal of the apartment to determine if it constituted sufficient collateral to secure the loan sought by Estrada. Id. at 1-2. Estrada claimed that he relied upon Hughes’ representation in the appraisal that the apartment was 451 square feet and valued at $440,000 in closing on the mortgage in March 2006. Id. at 2. In 2009, Estrada sought to refinance his mortgage, but was denied based upon a new appraisal of the apartment that indicated that square footage was 376 square feet and that the apartment was only valued at $350,000. Id. Estrada then ordered a historical appraisal of the apartment that listed the apartment as 344 square feet in size and valued at $330,000 as of March 2006. Id.

Estrada brought suit against Hughes for, inter alia, fraud, based upon the alleged misrepresentation of the size and value of the apartment in her appraisal conducted for Wells Fargo. Decision/Order at 4. On summary judgment, Hughes argued that there were no triable issues of material fact with respect to the fraud claim because Estrada’s alleged reliance upon the representation as to the size of the apartment was not reasonable and the size of the apartment could easily have been confirmed by Estrada had he measured the apartment.
The Court held that in order to prove a cause of action for fraud, a “[p]laintiff must show not only that he actually relied on the misrepresentations, but also that such reliance was reasonable.” Decision/Order at 4 (citing CPC Int’l v. McKesson Corp., 70 N.Y.2d 268, 285 (1987)). Further, “[w]here a party has the means to discover the true nature of the transaction by the exercise of ordinary intelligence, and fails to make use of those means, he cannot claim justifiable reliance on defendant’s misrepresentations.” Id. at 4-5 (citing 88 Blue Corp. v. Reiss Plaza Assocs., 183 A.D.2d 662, 664 (1st Dep’t 1992)). The Court found that “Plaintiff’s reliance on the misrepresentations of the size of the apartment was not reasonable or justifiable.” Id. at 5. In this regard, the Court reasoned:

Plaintiff could have easily measured the apartment for himself, particularly after receiving not one, but two different estimates from Metropolitan and then receiving the appraisal from Hughes which was also different. Plaintiff failed to do his due diligence, and proceeded to close on the purchase of the residence while fully realizing that he was presented with three different measurements for the apartment.
Id. at 5-6. Accordingly, the Court granted Hughes motion for summary judgment and dismissed Estrada’s cause of action for fraud.

For more information on this case (which can be viewed as a PDF here:  Estrada Decision – Aug. 2012), or to discuss real estate and commercial litigation matters generally, please contact us.

Posted by Andrew Roth

EMERGING TRENDS IN FACEBOOK, TWITTER, AND OTHER SOCIAL MEDIA IN NEW YORK STATE COURT LITIGATION AND CRIMINAL PROCEEDINGS

Litigation

As Facebook, Twitter, and other forms of social media evolve and morph on a daily basis, such profound change in how the world communicates presents a growing challenge for attorneys and judges in the practice of law in New York State court litigation. The juxtaposition between what has become widely accepted forms of communication in the social media world, versus long standing traditions and body of law, rules and ethics governing communications and research in the practice of law has created modern challenges for the legal system. Recently, the state and local bar, as well as the judiciary, have attempted to address these concerns through a series of ethics opinions, and an emerging body of case law, in order to provide some guidance as to the permissible standards to be followed in the use of social media in the context of state court litigation. These developments and emerging trends can be seen in recent Supreme Court decisions and a New York City bar opinion highlighted below.

Jury Research and Social Media (NYLJ) NYC Bar Association Opinion No. 2012-02-2

On June 4, 2012, the New York City Bar released an ethics opinion titled “Jury Research and Social Media,” governing the use of social media to research potential or sitting jurors. Click here to review N.Y.C. Bar Opinion No. 2012-02. The central question that the Opinion attempts to address is: “What ethical restrictions, if any, apply to an attorney’s use of social media websites to research potential or sitting jurors?”

In answering this question, a recent article by Thomson Reuters, dated June 4, 2012, notes that the opinion “focuses on what constitutes a forbidden ex parte communication on websites like Facebook and Twitter, which many lawyers are using to dig up information on potential jurors or monitor for signs of misconduct during trials.” For a complete copy of this article, click here.

In particular, the Opinion states that “[c]ommunication, in this context, should be understood broadly, and includes not only sending a specific message, but also any notification to the person being researched that they have been the subject of an attorney’s research efforts.” The Opinion cautions that “[e]ven if the attorney does not intend for or know that a communication will occur, the resulting inadvertent communication may still violate the rule.”

Notably, the article points out that, previously, “in 2011, the New York County Lawyers Association issued an advisory opinion restricting attorneys’ social media research to publicly available information and warning against using the sites to contact individuals. But the question of what constitutes a ‘communication’ has become increasingly difficult for attorneys to navigate, given the myriad of ways in which users can find out who has attempted to view their social media pages, the city bar opinion states.”

For example, “a request to add someone as a ‘friend’ on Facebook would be prohibited under American Bar Association Formal Opinion 319, which prohibits ex parte communication with potential or sitting jurors, according to the opinion. Chats and messages sent to users over such sites would also be prohibited.”

With regard to the ‘Duty of the Attorney,’ the article notes that “[t]he opinion cautions against the ‘ethical risk’ that may arise if research is done on a social media service that alerts users when another individual has viewed their information. Professional networking site LinkedIn and some dating websites, for instance, show users who have viewed their profile.” In this regard, “[t]he central question an attorney must answer before engaging in jury research using a particular site or service is whether her actions will cause the juror to learn of the research.”

The analysis suggests that “[t]he same prohibition against communication via social media websites applies to anyone doing research on the lawyer’s behalf, according to the opinion, as well as midtrial research to investigate potential instances of misconduct. The bar group acknowledged that it intentionally left its definition of ‘communication’ open-ended to account for the evolution in how social media sites function. But ultimately it’s the lawyer’s ethical obligation to be aware of how each site works, according to the opinion.”

Moreover, the Opinion states “[i]t is the duty of the attorney to understand the functionality and privacy settings of any service she wishes to utilize for research, and to be aware of any changes in the platforms’ settings or policies to ensure that no communication is received by a juror or venire member.”

The Opinion ultimately concludes by stating that “[l]awyers can make use of any information made publicly available on social media websites under New York Rules of Professional Conduct 3.5 and Rule 8.4(c).” Nonetheless, as the article clarifies, “[b]ut if it seems the individual has misunderstood the site’s privacy settings and didn’t intend the information to become public, a lawyer should proceed with caution.”

Defendants Granted Disclosure of ‘Facebook’ Postings Pre-, Post-Dating Accident (NYLJ) D’Agostino v. YRC, Inc., et al., (Sup. Ct. Orange Cty., May 17, 2012)

On May 17, 2012, in a case entitled D’Agostino v. YRC, Inc., et al., the Orange County Supreme Court issued an order granting the disclosure of ‘Facebook’ posting pre- and post-dating a car accident. Click here for the D’Agostino decision.

In D’Agostino, Defendants, transportation companies, moved for an order compelling plaintiff to respond to a supplemental notice for discovery and inspection demanding plaintiff’s Facebook account postings pre-dating the accident which is the subject of the action.

In their motion, Defendants argued that plaintiff is claiming psychological and emotional damages. In support of their argument, Defendants pointed to the fact that plaintiff’s own deposition testimony reveals that she suffered emotional and psychological problems and stressors predating the action and actually posted on the Facebook social media website comments concerning her mental and emotional state prior to this accident.

Specifically, Defendants requested all social media postings and photographs contained on plaintiff’s social media accounts whether posted by her or others concerning any mental, emotional or physical condition suffered by plaintiff for which she claims an injury in the action. The Court noted that such postings both pre- and post-date the accident.

As the Court explained, “[p]laintiff claims depression and emotional and mental injuries in the lawsuit, but now wants to prevent the defendants from ascertaining the extent that those conditions existed prior to the accident and the extent they may have been exacerbated or not from this accident.” The Court reasoned that “[b]y bringing this action, plaintiff placed her own mental, emotional and physical conditions at issue.” Further, the Court noted “[t]he fact that [plaintiff] testified that she regularly posted her feelings on social media websites prior to and subsequent to this accident is wholly relevant information concerning [plaintiff’s] mental, physical and emotional states both before and after the accident.”

In reaching its decision, the Court held that “[p]laintiff cannot now claim an expectation of privacy when she share her feelings online, testified that she did so, and now makes claims for related injuries to this action.”

This case demonstrates the diminishing expectation of privacy that litigants, and their counsel, can expect in the disclosure of material or exculpatory evidence, where the content of social media postings and communications bear upon the relevance of the claims that are the subject matter of the litigation.

‘Public’ Tweets Are Subject to D.A.’s Subpoena, Judge Says (NYLJ) People v. Harris, 2011 NY080152 (Crim. Ct. N.Y. Cty., June 30, 2012)

On June 30, 2012, in a case entitled People v. Harris, Criminal Court Judge Matthew Sciarrino Jr., sitting in Manhattan, held, in a case of first impression, that Twitter, Inc. must produce tweets and user information of an Occupy Wall Street protestor. Click here for the Harris decision.

In particular, Judge Sciarrino ordered the site to produce in chambers Malcolm Harris’ use information and tweets from a more than three-month period—information the Manhattan District Attorney’s Office is seeking for its prosecution of a disorderly conduct case charge against Harris. Harris was one of 700 Occupy Wall Street protestors arrested on October 1, 2011, during a march across the Brooklyn Bridge.

In reaching its conclusion, the Court reasoned that “[t]he Constitution give you the right to post, but as numerous people have learned, there are still consequences for your public posts. What you give to the public belong to the public. What you keep to yourself belong only to you.”

Like D’Agostino (discussed above), this case also demonstrates the diminishing expectation of privacy that litigants, and their counsel, can expect where the content of social media postings and communications bear upon the relevance of the claims that are the subject matter of the litigation.

Indeed, the emergence of social media presents a myriad of issues for attorneys litigating in both civil and criminal courts in New York State. Being current in this area will prevent “impermissible” communications or the appearance of such, and will assist counsel in avoiding potentially sanctionable conduct. With these emerging trends, the difficulty lies in conforming good practices and ethics to an area of unchartered and evolving territory. We will continue to provide further updates if any changes occur in this area of the law.

Posted by Adam H. Koblenz

New York’s Appellate Division, First Department, Adopts Federal Zubulake Standards for Discovery of Electronically Stored Information

Litigation

Earlier this year, New York’s First Department adopted federal standards for discovery of electronically stored information (“ESI”) set forth in the case of Zubulake v. UBS Warburg LLC, No. 02 Civ. 1243(SAS) (S.D.N.Y.). The First Department’s decisions in two cases will likely have significant effects on litigants in New York courts as the role of ESI in the discovery process continues to expand and become ever more expensive.

In Voom HD Holdings LLC v. Echostar Satellite L.L.C., 93 A.D.3d 33 (1st Dep’t 2012), the First Department adopted Zubulake’s standard for preservation of ESI. In Zubulake, the federal district court held that “[o]nce a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.” Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 218 (S.D.N.Y. 2003) (“Zubulake IV”). The failure to properly preserve documents when one reasonably anticipates litigation can result in substantial court ordered sanctions, such as a negative inferences, monetary sanctions and even case dismissal. See 915

Broadway Assoc. LLC v. Paul, Hastings, Janofsky & Walker, LLP, 34 Misc 3d 1229(A) (Sup. Ct. N.Y. Co. Feb. 16, 2012).
Voom involved a contract dispute between Voom HD Holdings LLC, a producer of television programming, and Echostar Satellite L.L.C., a satellite broadcast provider. 93 A.D.3d at 36. Specifically, Echostar sought to terminate a 15 year affiliation agreement between the two entities after only a year and a half. Id. at 36-37. Accordingly, in June 2007, Echostar began sending notices to Voom indicating that it intended to terminate the agreement and that Voom had failed to abide by its conditions. Id. at 37. As a result of Echostar’s notices, Voom became “extremely concerned” about the possibility of litigation and implemented a litigation hold, automatically preserving all of its e-mails. Id. at 38. Echostar however, even though it began consulting in-house litigation counsel about “potential litigation” between July and October of 2007, did not implement a litigation hold until after the lawsuit commenced in January 2008, and did not suspend its automatic deletion of emails until four later. Id. at 39. Up to that time, Echostar’s litigation hold had relied upon the discretion of its employees to determine what was to be preserved as relevant to the litigation. Id. at 40.

In its decision, the First Department noted that Zubulake’s standard has been interpreted to mean that the duty to preserve evidence is triggered “when an organization is on notice of a credible probability that it will become involved in litigation, seriously contemplates initiating litigation, or when it takes specific actions to commence litigation.” 93 A.D.3d at 43. Therefore, Echostar should have “reasonably anticipated” litigation when it began sending notices to Voom indicating its intention to terminate the agreement. Id. at 39. At the very least, Echostar should have reasonably anticipated litigation when it began consulting its in-house litigation counsel in July 2007. Id. Either way, the First Department found that Echostar had failed to preserve evidence by implementing a proper litigation hold as soon as it “reasonably anticipated” litigation and affirmed the trial court’s decision to sanction Echostar with a negative inference. Id. at 40-41.

The trial court had rejected Echostar’s argument that it could not have reasonably anticipated litigation as early as June or July of 2007 because the parties were seeking an amicable business solution. Id. at 40. The trial court reasoned that “EchoStar’s argument ignores the practical reality that parties often engage in settlement discussions before and during litigation, but this does not vitiate the duty to preserve. EchoStar’s argument would allow parties to freely shred documents and purge emails, simply by faking a willingness to engage in settlement negotiations.” Id. The First Department agreed.

Accordingly, parties involved in litigation in New York courts should give careful consideration to its document preservation policies and procedures. Because the duty to preserve documents is triggered as soon as a party “reasonably anticipates” litigation, companies must ensure that a litigation hold is implemented as soon as it is on notice that there is a credible probability that it will become involved in litigation.

The First Department’s decision in Voom outlines an appropriate litigation hold policy that companies should implement once it reasonably anticipates litigation. According to the First Department, a litigation hold must accomplish the following:

[It] must direct appropriate employees to preserve all relevant records, electronic or otherwise, and create a mechanism for collecting the preserved records so they might be searched by someone other than the employee. The hold should, with as much specificity as possible, describe the ESI at issue, direct that routine destruction policies such as auto-delete functions and rewriting over e-mails cease, and describe the consequences for failure to so preserve electronically stored evidence. . . .[W]here a party is a large company, it is insufficient, in implementing such a litigation hold, to vest total discretion in the employee to search and select what the employee deems relevant without the guidance and supervision of counsel. Voom, 93 A.D.3d at 41-42.

In U.S. Bank National Assoc. v. Greenpoint Mortgage Funding, Inc., 94 A.D.3d 58 (1st Dep’t 2012), the First Department held that the cost of discovery, including searching for, retrieving and producing ESI should be initially placed on the producing party, relying upon the standard set forth in Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309, 317-18 (S.D.N.Y. 2003).

Prior to this decision by the First Department, courts in New York have issued conflicting decisions on the issue. The First Department noted that the “question of which party is responsible for the cost of searching for, retrieving and producing discovery has become unsettled because of the high cost of locating and producing electronically stored information.” Greenpoint, 94 A.D.3d at 62. Greenpoint Mortgage had argued that it was well-settled in New York law that the “party seeking discovery bears the costs incurred in its production.” Id. at 62. But, the First Department held that, due to the significant costs of discovery involving ESI, the Zubulake standard “presents the most practical framework for allocating all costs in discovery, including document production and searching for, retrieving and producing ESI.” Id. at 63.

Under the Zubulake standard, the producing party bears the initial cost of searching for, retrieving and producing ESI. However, upon the discretion of the trial courts, the costs may be shifted upon consideration of seven factors:

(1) [t]he extent to which the request is specifically tailored to discover relevant information; (2)[t]he availability of such information from other sources; (3)[t]he total cost of production, compared to the amount in controversy; (4)[t]he total cost of production, compared to the resources available to each party; (5)[t]he relative ability of each party to control costs and its incentive to do so; (6)[t]he importance of the issues at stake in the litigation; and, (7)[t]he relative benefits to the parties of obtaining the information. Zubulake, 217 F.R.D. at 322.

Consequently, litigants in New York courts should ensure that a cost-effective retrieval and review process is being used by counsel. Parties may want to inquire as to the appropriateness and effectiveness of newer and potentially cheaper technologies such as predictive coding.

Posted by Joseph R. Bjarnson